Insurance co-op to start with $65 million federal loan

Andrea K. Walker, The Baltimore Sun

A Maryland group led by Howard County health officer Peter Beilenson has received a $65 million loan under federal health reform to start the state's first insurance co-op, a consumer-owned nonprofit that will compete against private insurers to sell health policies.

Evergreen Health Cooperative Inc. hopes to begin operations by next October, when consumers will begin buying insurance on the state's new health exchange. The exchange is the market where those not covered by employee insurance can buy health policies under the federal reform law. The company also will sell insurance outside of the exchange.

The Affordable Care Act includes the creation of co-ops, or consumer-operated and -oriented health plans, as a new option for coverage as millions of people seek mandated coverage.

Beilenson said Evergreen would target Marylanders whose salaries are too high to qualify for Medicaid but who find private insurance unaffordable.

The company hopes to control costs by focusing on preventive care and moving away from the fee-for-service payment model for physicians, where doctors are encouraged to do numerous tests and procedures on patients to see a bigger payment.

"We want to make insurance much more accessible to patients," Beilenson said. "We want to help those lower-income families who will have a hard time buying insurance even with the subsidies under the Affordable Care Act.

Beilenson, who announced the co-op Friday,said it is unclear what role he will play in the new entity.

The federal government has awarded loans to start up nearly two dozen co-ops in several states.

A second group, whose main sponsor is MedChi, the Maryland State Medical Society, plans to submit an application to the federal Centers for Medicare & Medicaid Services next week to fund a second co-op insurance company in Maryland.

That entity would be called DelMar and would offer insurance to people living on the Eastern Shore and in Delaware.

Gene Ransom, MedChi's CEO, said his group also supported Evergreen's startup. He said there are not enough insurance choices in Maryland.

"We like the idea of more co-ops and more competition in the market," Ransom said. "We have a very concentrated health insurance market in Maryland. That is not good for patients and doctors."

Del. Shawn Z. Tarrant is advising MedChi on the co-op as part of his employment with a health care company based in Florida. The Baltimore Democrat said that DelMar would target an under-served market. He said co-ops are good insurance options because the profits go back into the company.

Under a co-op structure, members serve on the board and decide the direction of the company.

"The profits go to lowering premiums," Tarrant said. "The members have a say in the direction of the entity. They have a vote as far as how it is run."

Beilenson said Evergreen expects to attract 15,000 to 20,000 customers in its first year. The co-op will spend the next several months signing up doctors and setting up general operations.

One-third of Maryland's 750,000 uninsured are expected to gain coverage in the first year that health reform is fully implemented.

Passed in 2010, the health reform law already has provided coverage for young adults up to age 26 on their parents' policies, insurance for children with pre-existing conditions and financial help with drug costs for people on Medicare. It also prohibited insurance companies from limiting how much they will cover.